Coffee Market Report March 04 2020

The International Coffee Organisation ICO have reported that the global coffee exports for the month of January were 7.63% lower than the same month last year, at a total of 10.29 million bags, This they say, has contributed to the cumulative global coffee exports for the first four months of the present October 2019 to September 2020 coffee year to be 5.8% lower than the same period in the previous coffee year, at a total of 39.53 million bags. 

The same ICO report has estimated that global coffee consumption will rise by 0.7% for this present October 2019 to September 2020 coffee year to 169.34 million bags, which is marginally above what they estimate to be the coffee supply for this coffee year. With Global coffee production expected to fall by 0.8% to 168.86 million bags, the ICO has narrowed its projected deficit to 480,000 bags from 626,000 bags previously for the October 2019 to September 2020 coffee year. 

Within the ICO report, total global exports for the first four months of the seasonal coffee year October 2019 to September 2020 are seen to have increased from Africa, to a total 4.38 million bags, fueled by increased exports from leading arabica producer Ethiopia, seconded by the leading robusta producer in Africa, Uganda. There was however, a decline in exports from Asia and the largest robusta producer, Vietnam, registered a 14.60% decline in exports, when compared to the same four months of the previous coffee year, balanced in part by increased exports from Indonesia, as this country which traditionally produces 80:20 robusta:arabica, recorded improved year on year production, assisted by conducive weather during crop development. 

The ICO report similarly includes within the total global exports, the cumulative export figures, from Mexico and the traditional washed arabica Central American bloc; Costa Rica, Guatemala, Honduras, Nicaragua and El Salvador, to report that the first four months of the cumulative coffee year posted an increase by 1.7% to a total 3.07 million bags.  The improved reference prices in New York, provided a boost to selling activity from this region with new crop harvests now complete, and led by Honduras, the lower export figures reported through October to December, registered combined positive export reports.  

The quality washed arabica countries of which Colombia, Central America, Mexico and Peru are collectively the largest exporter bloc to consumer markets, were to some degree anticipated to reflect some impact as a result of the perpetual year on year soft reference prices of the coffee terminal markets. The negative financial impact upon coffee farmers to inevitably result in low farm inputs ahead of the new coffee crops, to affect overall potential yield, as well as during harvest, less cyclical harvest rounds reducing the potential quality of harvested coffee. 

With the October 2019 to September 2020 harvest complete in Central America meanwhile, there are reliable reports originating from these higher cost of production washed arabica countries to indicate that the overall impact and losses in production are likely to have been underestimated ahead of the harvests in this region.  With the harvests now complete, reports are emanating from various sectors within origin countries, although without quantifiable numbers to support these reports at this stage.  There is nevertheless, evidence of very limited coffee flow from the interior, while exporters have long term forward commitments in place well ahead of the harvest season and there is little to indicate that this prevailing lack of coffee flow, will be alleviated in the near term. 

The May to May contracts arbitrage between the London and New York markets broadened yesterday; to register this at 61.80 usc/Lb.  This equates to 50.57% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 9,216 bags yesterday; to register these stocks at 2,127,733 bags, with 89.7% of these certified stocks being held in Europe at a total of 1,909,517 bags and the remaining 10.3% being held in the USA at a total of 218,216 bags.  There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 0 bags. 

The commodity markets were mixed in trade yesterday, to see overall macro commodity index taking a sideways track for the day. The Coffee market ended the day on a positive note, while the Cocoa and Sugar markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.9139% higher; to see this index registered at 390.7277.   The day starts with the U.S. Dollar steady, trading at 1.281 to Sterling, at 1.116 to the Euro and with the US Dollar buying 4.514 Brazilian Real. 

The London and New York markets started the day yesterday trading on a buoyant positive note, both markets continued on this positive track into the early afternoon trade. As the afternoon progressed the New York market started to attract buying support to move deeper into positive territory where closes near to the highs of the day, while the London market followed suit with late in the day buying support to close on the highs for the day’s trade. 

The London market ended the day on a positive note and with 97.56% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note and with 96.35% of the earlier gains of the day intact.  This close is supported by technical and fundamental factors, which has boosted the bullish sentiment of the markets, This might assist to inspire a follow through cautious and hesitant steady start for early trade today, against the prices set yesterday, as follows:   

LONDON ROBUSTA US$/MT                                             NEW YORK ARABICA USc/Lb.                                                

MAR   1305 + 40                                                                        MAR  121.05 + 6.40

MAY   1331 + 40                                                                        MAY  122.20+ 6.60

JUL    1346 + 36                                                                        JUL    124.20 + 6.70

SEP    1362 + 35                                                                        SEP   126.05 + 6.75

NOV   1378 + 33                                                                        DEC   128.30 + 6.70

JAN    1394 + 33                                                                        MAR  130.40 + 6.65

MAR   1409 + 32                                                                        MAY  131.60 + 6.50

MAY   1428 + 31                                                                        JUL    132.70 + 6.40

JUL    1449 + 31                                                                        SEP    133.75 + 6.30